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Rogue Trader Leeson Attacked By Microsoft

Nick Leeson said poor IT practice helped bring down Barings Bank, and faced criticism from Microsoft security advisor and former FBI agent Gibson

Former rogue trader Nick Leeson told eWEEK Europe that better IT procedures might have prevented the fall of Barings Bank in 1995 – and was later accused of passing the buck by Ed Gibson, the ex-FBI agent who is now chief security advisor to Microsoft UK.

Before a talk which closed this week’s RSA Conference Europe security event in London, Leeson told eWEEK Europe that better IT systems might have spotted the rogue trading with which he caused the downfall of Barings. Later, after the talk, Gibson pulled up the former trader on his seeming lack of culpability.

Gibson said that Leeson’s speech reminded him of his career in the FBI when he arrested numerous criminals who all appeared to be blame others for their crimes rather than accept responsibillity themselves. “In fact it was your fault for not saying enough is enough,” said Gibson.

However, after initially harsh words, the forrmer FBI man went on to thank Leeson for being brave enough to discuss the case on stage and confront his past. “I hope that by you speaking about what happened, anyone who has any thoughts about engaging in that activity will stop and think twice.”

For his part, Leeson maintained that he had never tried to blame anyone but himself for his actions. “I never try to excuse myself,” he said.

But responding to another question, Leeson said he believed that unless wider lessons about lack of management and corporate governance could be learned, then incidents such as Barings were doomed to be repeated. “When an incident like that happens, it is convenient for a bank to have a scapegoat as it detracts from where the real problems are which is that regulations are not good enough.”

Leeson famously brought down Barings Bank in 1995 after a series of unauthorised and risky trades accumulated to losses of £827 million – twice the bank’s trading capital. After briefly fleeing to Thailand and Germany, he was eventually arrested and sentenced to six years in a Singapore jail.

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Speaking to eWEEK Europe UK, before his talk, Leeson said that although more sophisticated IT systems might have helped Barings’ management in London discover his illegal activities in Singapore early on, the fundamental problem was that no one was really looking out for problems or suitably qualified in the sophisticated trading he was doing to spot any issues.

One of the factors that enabled Leeson to hide his crime was the lack of direct supervision over him in the trading operation he managed in Singapore – leaving him isolated and autonomous to a degree.

“Email existed back then so I would certainly have email conversations with external banks and the internal people at Barings as well. But the actual sharing of information between departments was done electronically – it was pretty basic stuff but the communication was just never done properly,” he said.

However, Leeson maintained that although he did dodge some communication from London, all the information on his trades was sent electronically back to the UK and was there if anyone chose to look for it. Leeson infamously used a fabricated account called 88888 – a lucky number in China – to hide his losses.

“In terms of me dodging things – it was proven that when the liquidators went back it was show that every single trade went back to the IT department in London and religiously every single day they deleted those trades because they didn’t recognise the account numbers,” he said.